Graco 2010 Annual Report Download - page 41

Newell Rubbermaid Inc. 2010 Annual Report
NEWELL RUBBERMAID 2010 Annual Report 37
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The total projected benefit obligations of the Company’s pension and postretirement plans as of December 31, 2010 were
$1.45 billion and $166.5 million, respectively. The Company used weighted-average discount rates of 5.3% to determine the
projected benefit obligations for the pension and postretirement plans as of December 31, 2010. The following table illustrates
the sensitivity to a change in certain assumptions for the projected benefit obligation for the pension and postretirement plans,
holding all other assumptions constant (in millions):
December 31, 2010
Impact on PBO
25 basis point decrease in discount rate +$52.4
25 basis point increase in discount rate -$49.7
The Company has $425.4 million (after-tax) of net unrecognized pension and other postretirement losses ($662.5 million pre-tax)
included as a reduction to stockholders’ equity at December 31, 2010. The unrecognized gains and losses primarily result from
changes to life expectancies and other actuarial assumptions, changes in discount rates, as well as actual returns on plan assets
being more or less than expected. The unrecognized gain (loss) for each plan is amortized to expense over the average life of each
plan. The net amount amortized to expense totaled $13.1 million (pre-tax) in 2010, and amortization of unrecognized net losses is
expected to continue to result in increases in pension and other postretirement plan expenses for the foreseeable future. Changes
in actuarial assumptions, actual returns on plan assets and changes in the actuarially determined average life of the plans impact
the amount of unrecognized gain (loss) recognized as expense annually.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board issued new accounting guidance related to the disclosure requirements
for fair value measurements and clarified existing disclosure requirements. More specifically, this update requires (a) an entity to
disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe
the reasons for the transfers, and (b) information about purchases, sales, issuances and settlements to be presented separately,
on a gross basis rather than net, in the reconciliation for fair value measurements using significant unobservable inputs (Level 3
inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and
liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for
both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications
of existing disclosure were effective beginning January 1, 2010, except for the disclosure requirements related to the purchases,
sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements, which are effective for the
Company on January 1, 2011. The adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.
INTERNATIONAL OPERATIONS
For the years ended December 31, 2010, 2009 and 2008, the Company’s non-U.S. businesses accounted for approximately 31%,
30% and 31% of net sales, respectively (see Footnote 19 of the Notes to Consolidated Financial Statements). Changes in both U.S.
and non-U.S. net sales are shown below for the year ended December 31, (in millions, except percentages):
2010 vs. 2009 2009 vs. 2008
2010 2009 2008 % Change % Change
U.S. $ 3,949.9 $ 3,881.4 $ 4,447.2 1.8% (12.7)%
Non-U.S 1,809.3 1,696.2 2,023.4 6.7 (16.2)
$ 5,759.2 $ 5,577.6 $ 6,470.6 3.3% (13.8)%
The Company began accounting for its Venezuelan operations using highly inflationary accounting in January 2010. Under
highly inflationary accounting, the Company remeasures assets, liabilities, sales and expenses denominated in Bolivar Fuertes
into U.S. Dollars using the applicable exchange rate, and the resulting translation adjustments are included in earnings. As of
December 31, 2010, the Company’s Venezuelan subsidiary had approximately $29.5 million of net monetary assets denominated
in Bolivar Fuertes, and as a result, a 5% increase (decrease) in the applicable exchange rate would decrease (increase) the Company’s
pretax income by $1.5 million.
In May 2010, the Venezuelan government enacted reforms to its foreign currency exchange control regulations to close down
the parallel exchange market. In early June 2010, the Venezuelan government introduced a newly regulated foreign currency
exchange system, Transaction System for Foreign Currency Denominated Securities (“SITME”). Foreign currency exchange through
SITME is allowed within a specified band of 4.5 to 5.3 Bolivar Fuerte to U.S. Dollar, but most of the exchanges have been executed
at the rate of 5.3 Bolivar Fuerte to U.S. Dollar. The Company began applying the SITME rate of 5.3 Bolivar Fuerte to U.S. Dollar in
May 2010. The transition to the SITME rate from the parallel rate did not have a material impact on the Company’s consolidated
net sales or operating income for the year ended December 31, 2010, compared to using the parallel rate for the same period.
The transition to the SITME rate did result in a one-time foreign exchange gain of $5.6 million, which is recognized in other
income for the year ended December 31, 2010.